Powered by price optimization technology, Profit-based pricing is an advanced approach that enables executives to strategically use pricing to achieve improved financial results, gain insight into customer preferences, and support compliance. The suite includes specific solutions for auto finance, home equity lending, personal lending, mortgage, and deposits. Each solution delivers quick time-to-benefit, increases profits and market share by 10-20%, and provides valuable insights about how customer preferences impact product and portfolio performance, within a strong compliance framework.

Which Approach Are You Using to Set Your Prices?

Most banks and finance companies use one or a combination of the following approaches to guide pricing decisions and determine rates and fees:

• Cost or Risk-based Pricing: Rates and fees are set based on the cost of a product, which takes into account net credit loss due to customer risk, but doesn't consider competitive pricing
• Market-based Pricing: Rates and fees are set based on competitive prices, which doesn't take into account the value a customer places on the product or service or the profitability of the loan
• Anecdote-based Pricing: Rates and fees are set based on rules of thumb, which doesn't take into account current market and competitive realities
• "Volume"-based Pricing: Rates and fees are set based on how hard a salesperson fights to get pricing and credit exceptions to maximize their booked volume - at the expense of lender profitability

Even when all four approaches are used in combination, they fail to take into account a critical factor: the dealer's and/or customer's price sensitivity.

Why is Profit-Based Pricing a Better Approach?

Nomis Price Optimizer™ Suite enables financial services organizations to attain the next frontier in pricing: Profit-based Pricing. The suite helps maximize profits, while maintaining market share and revenues through the strategic use of customer data to tailor pricing by product and customer segment. The solution provides an understanding of how specific customer segments value various financial products and the optimal rate and price that should be offered.

Three unique capabilities are built into Nomis Price Optimizer Suite 3:

• Better Tailor Prices and Maximize Profitability: Leveraging lost quote data, the solution provides a better understanding of consumer price sensitivity. By incorporating business goals, the solution increases profits while maintaining volume and credit quality. Accounting for adverse selection enables the solution to understand the critical interactions between pricing and risk.
• Enhance Customer Loyalty and Boost Lifetime Profitability: Taking multi-product information into account enables a full relationship view when determining price recommendations. Managing the impact of price-driven attrition, early settlement, and default ensures that profit improvements are sustainable over time.
• Better Track and Control Pricing Decisions: Providing an integrated view of the entire pricing process provides the ability to monitor performance, analyze gaps and opportunities for improvement, and learn how the market responds to new rates and prices. Having a record of all pricing decisions and the factors that influenced price provides more control over disparate impact and enables you to better meet regulatory requirements.